3393: New Contracts and Steady Metrics Will Shape Outlook After Recent Tender Wins

Key Takeaways

• Rapid global expansion and strong partnerships in emerging sectors are driving Wasion's revenue diversification and positioning it for sustained international and recurring earnings growth.
  
• Technological innovation, operational efficiency, and alignment with green energy trends enable Wasion to move up the value chain and support stable profit margins.
  
• Intensifying competition, technological shifts, and rising regulatory risks threaten margins, revenue stability, and overseas growth while demanding higher investment amid mounting operational uncertainties.

Catalysts

An investment holding company, engages in the research and development, production, and sale of energy metering and energy efficiency management solutions for energy supply industries.

• Wasion is experiencing strong overseas expansion, with factories in Indonesia, Malaysia, and Hungary now operational; major new contracts in regions like Mexico, Tanzania, and the Middle East point to sustained international growth, benefiting from rising global urbanization and electricity consumption-likely to drive top-line revenue increases and improved revenue diversification.
  
• Ongoing modernization and digitalization of power grids worldwide-including AMI 2.0 replacement cycles in the US and Europe, and new policy mandates for decarbonization and grid transformation in China-put Wasion in a favorable position to capture long-term demand for advanced metering and grid-automation products, directly supporting revenue and earnings growth.
  
• The shift toward green energy, energy storage, and electrification (including data centers and electric mobility) aligns with government and regulatory pushes for decarbonization; Wasion's new partnerships (e.g., GDS, DayOne, ByteDance) and record orders in these sectors are likely to provide sustained margin expansion and recurring revenue streams.
  
• Aggressive investment in R&D (7.2% of 2025 operating income) and successful rollouts of new technologies (e.g., carbon metering, AI-powered IoT solutions, liquid cooling systems) enable Wasion to move up the value chain, introduce higher-margin products, and maintain competitiveness, which can enhance net profit margins in the medium-to-long term.
  
• Robust cost control measures, automation, and vertical integration strategies have kept gross profit margins stable despite competitive and downward pricing pressures in China, signaling potential for continued improvement in operational efficiency and resulting in enhanced earnings and profit growth.

Wasion Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Wasion Holdings's revenue will grow by 18.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.7% today to 10.9% in 3 years time.
• Analysts expect earnings to reach CN¥1.7 billion (and earnings per share of CN¥1.5) by about September 2028, up from CN¥814.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.4x on those 2028 earnings, down from 12.4x today. This future PE is lower than the current PE for the HK Electronic industry at 12.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.95%, as per the Simply Wall St company report.

Wasion Holdings Future Earnings Per Share Growth

Risks

• Intensifying price competition and commoditization in both domestic and overseas smart meter markets-highlighted by executives noting tender price drops and fierce battles with other Chinese companies-could compress gross margins and limit long-term profitability growth.
  
• Rising customer concentration risk, especially dependence on large centralized tenders from China State Grid and Southern Grid, generates earnings volatility if major contracts are lost or procurement schedules change, directly impacting annual revenue stability.
  
• Rapid technological evolution towards software-based, interoperable digital solutions and integrated smart grids could reduce demand for traditional or proprietary metering hardware, risking product obsolescence and potentially shrinking Wasion's addressable market over time, impacting future revenue streams.
  
• Heightened geopolitical and regulatory risks-including localization requirements, potential trade tensions between China and Western countries, and global ESG pressures-may restrict Wasion's access to international markets, increase compliance costs, and limit anticipated overseas revenue and margin expansion.
  
• Escalating R&D and capital expenditures required to maintain technology leadership and global expansion, coupled with the risk of delayed certification or slower-than-expected ramp-up at new overseas factories, could pressure cash flow and earnings growth if revenue conversion lags investment.

Valuation

• The analysts have a consensus price target of HK$12.211 for Wasion Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$14.99, and the most bearish reporting a price target of just HK$11.03.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥15.7 billion, earnings will come to CN¥1.7 billion, and it would be trading on a PE ratio of 8.4x, assuming you use a discount rate of 8.9%.
• Given the current share price of HK$11.04, the analyst price target of HK$12.21 is 9.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.